51% of U.S. Workforce Enrolled in High-Deductible Health Plans, Which May Leave Some Underinsured

Despite certain benefits for HDHP holders, added costs can increase the risk of future financial problems for many consumers.

Doctor's office waiting room. Source: Getty Images

High-deductible health plans (HDHPs) were created for consumers to have a health insurance option with lower premiums and high deductibles. These plans can be linked to health savings accounts (HSAs) to pay for qualified medical expenses in a tax-advantaged way.

Many Americans have chosen to enroll in HDHPs as health insurance premiums have increased throughout the 21st century. With this in mind, ValuePenguin analyzed which states have the highest percentages of employees enrolled in HDHPs.

However, these plans generally aren’t ideal for families or individuals with modest to high medical expenses, meaning there may be better options for consumers.

Key findings

Fifty-one percent of the workforce nationwide was enrolled in a high-deductible health plan in 2019 — the latest year for which data is available — the highest percentage over the past five years.
HDHP enrollment has grown by 43% over the past five years. In that period, only one state — Maine — saw a decrease (3%) in the percentage of workers enrolled in HDHPs.
South Dakota (72%), Connecticut (70%) and Arizona (66%) lead the nation in HDHP enrollment.
Hawaii (13%), the District of Columbia (32%) and Mississippi (35%) have the lowest percentages of the workforce enrolled in HDHPs.

HDHP enrollment is on the rise within employer-sponsored and individual marketplace health insurance, but is it for the right reasons?

More than half of employees are covered by HDHPs, which have deductibles of at least $1,400 for individuals or $2,800 for families. While HDHPs have considerably cheaper monthly premiums — which decrease upfront health insurance costs — they can have adverse effects for those facing expensive medical bills.

chart high deductible enrollment 51% in 2019

Across the U.S., the highest HDHP rate among employees is in South Dakota, where more than seven in 10 (72%) workers have this type of health plan. Connecticut (70%) and Arizona (66%) are close behind.

Although enrolling in an HDHP can be good for some, this high enrollment rate suggests that some are not aware of the pitfalls associated with these plans. This could be especially true for families with HDHP coverage that have high medical bills. In this case, a family could owe $14,000 in out-of-pocket health insurance costs.

HDHP affordability example

Two individuals are looking for health insurance. Person A decides to purchase a high-deductible policy with a $2,500 annual premium and $5,000 deductible, while Person B decides on a plan with a higher annual premium ($3,500) and lower deductible ($2,000).

If both individuals incurred $5,000 medical expenses during the year, Person B would save $2,000 compared to Person A.

	Person A	Person B
Annual premium	$2,500	$3,500
Deductible	$5,000	$2,000
Medical expenses	$5,000	$5,000
Total costs (premium and deductible costs)	$7,500	$5,500

Since Person B had a deductible $3,000 lower than Person A, they were able to get more of the $5,000 medical expense covered by their insurance provider at 100%.

Where have HDHPs grown the most over the past 5 years?

As we noted, HDHPs have become increasingly popular over the past five years, rising 43% during the time period. Over that period, the highest growth has been seen in Hawaii (306%), the District of Columbia (133%) and Maryland (121%). On the other hand, only one state saw negative growth during this time frame — Maine, which fell by 3%.

HDHP annual plan averages — and the benefits of HDHPs

Here are average costs for employer-sponsored HDHPs for the 2020 plan year via Kaiser Family Foundation.

Annual plan averages	Single coverage	Family coverage
Premiums	$7,464	$22,463
Deductibles	$2,195	$4,508
Out-of-pocket maximums	$4,458	N/A

The main benefit of HDHPs is that they generally offer cheaper health insurance premiums. These high-deductible policies have annual premiums that are 36% cheaper than those of low-deductible policies — plans with deductibles that are less than the amount the IRS uses to define high-deductible plans — on individual marketplaces.

The average cost of a high-deductible health plan is $4,971 a year, while a low-deductible plan costs $7,816 a year.

Another advantage of HDHPs is the ability to contribute funds to HSAs, which allow you to contribute pretax dollars and then use those funds for qualified health insurance expenses such as medical bills or checkups.

Why high-deductible plans can have adverse health insurance effects

The primary adverse scenario with HDHPs is being hit with a massive medical bill. This can happen, for example, when you go to a routine checkup covered by insurance and then find out you have a serious — and expensive — health problem that won't be covered.

In a normal year, these plans may also impact your future health. By having an HDHP, you may be less likely to use your health insurance or visit a doctor — possibly exacerbating existing health problems — due to fear of receiving a medical bill that you can’t afford out of pocket. ValuePenguin recommends shopping around for coverage if you can.

Some policyholders can further offset the high cost of a plan's deductible by taking advantage of an HSA.

Fortunately, many insurers are providing financial relief during the coronavirus pandemic. The IRS has announced that HDHP plans can cover the cost of treating COVID-19 before their policyholders' deductibles have been met. Those who aren't able to budget for deductible costs may avoid being excluded from treatment.

Methodology

ValuePenguin researchers analyzed data from the State Health Compare tool, which aggregates HDHP enrollment by state. We also analyzed public use files from the Centers for Medicare and Medicaid Services (CMS) to determine average costs of HDHPs and low-deductible health policies.